- The NFT market experienced a slump with the rest of crypto in 2022, but some collections stood out from the pack.
- Yuga Labs’ Otherside mint raised a record-breaking $310 million in April.
- Generative artists like Emily Xie and Tyler Hobbs helped push the scene forward.
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Several NFT collections stood out from the pack against adverse conditions as the market returned to earth this year.
The Best NFT Drops of 2022
At this point, few people need reminding that NFTs had a pretty big 2021. Still, it would be impossible to talk about the state of the nascent space in 2022 without first acknowledging the technology’s boom during the last crypto bull run.
Mania hit the NFT market last year after that Beeple sale at Christie’s, to the point where new Bored Ape Yacht Club-inspired avatar collections were dropping daily, digital rocks were selling for millions, and now-defunct hedge funds were dropping seven figures on generative art JPEGs.
In 2022, the market was far more subdued as crypto entered what some are describing as its harshest winter yet. Prices for many once sought-after JPEGs tumbled while trading volumes on every major marketplace declined.
But despite the harsh climate, several new developments gave NFT believers renewed hope that there may be life to this thing after all. OpenSea, one of the big winners of last year’s boom, saw a host of promising new competitors enter the space, though none have yet stolen its crown. The world’s biggest social media company, Meta, rolled out support for what it’s calling “digital collectibles” on Instagram, and Reddit onboarded three million new users through its collectible avatar sale.
With less noise clogging up social feeds and only the diehards remaining, the best NFT collections of the year had an easier time standing out from the pack. To kick off our 2022 in Review series, we picked out five of our favorite drops that made a big impact on the space over the year. In 2022, the market flocked to the most hyped avatar mints, generative art had a strong run, and Yuga Labs proved that Bored Ape mania still has life yet.
Memories of Qilin—Emily Xie
Emily Xie is an Asian-American generative artist based in New York. Alongside names like Ben Kovach, Tyler Hobbs, and William Mapan, she’s part of a tight-knit scene that’s pushing the boundaries of digital art with code.
Xie was a key figure in the generative art space before NFTs took off, but her profile rose in 2022 after the release of Memories of Qilin, this year’s standout Art Blocks collection. Memories of Qilin depicts Xie’s singular style by giving a nod to traditional East Asian painting, and like many other top-tier generative art collections, it feels like the kind of thing that could have been painted by hand.
Xie created the collection using techniques like masking and geometric design in p5.js, for 1,024 striking outputs that evoke lifelike images. Memories of Qilin explores folklore; it takes its name from a unicorn-like beast that appears in Chinese mythology.
Memories of Qilin launched as the market trended down in March and was initially overlooked outside of the relatively niche generative art scene. However, the floor price later jumped and has held strong as interest in NFTs wanes.
Trading activity on Memories of Qilin and other collections like it shows that the NFT market has become more fragmented, and those who are drawn to generative art are rarely the same as those looking to flip avatars for profits. Memories of Qilin fans are closer to traditional art collectors, which makes perfect sense; this is the kind of art that wouldn’t look out of place on the wall of a real-world home or gallery. CW
Moonbirds, a collection of 10,000 pixel art owl avatars from art collective PROOF, hit the Ethereum blockchain in April. Straight out of the door, the collection received criticism for its hefty price tag, charging a whopping 2.5 ETH (around $7,600 at the time).
Launching off the success of PROOF’s earlier NFT passes, which gave holders exclusive access to limited pieces by top crypto and NFT artists, the hype surrounding Moonbirds was extreme. Even at a $7,600 mint price, the demand far outweighed the collection’s 7,875 public supply (2,125 NFTs were reserved for PROOF Collective holders and the PROOF team).
In an attempt to make the allocation process fair, the PROOF team ran a raffle to decide who would be able to mint, with hopefuls required to submit a wallet containing 2.5 ETH to get a shot at minting. Once all the entries were in, the team revealed it had received about four entries into the allowlist raffle for every NFT available. Although the PROOF team took measures to prevent the drop from being Sybil attacked, some cheaters got through multiple times.
Moonbirds stood out from other hyped collections this year in how easy it was for minters to make life-changing money in a short space of time. At their peak, floor price Moonbirds were selling for over 30 ETH, representing a 1,100% return on the 2.5 ETH mint price. Of course, as crypto winter set in, Moonbirds slowly bled on the secondary market as interest in NFTs faded. They currently trade at a floor price of 7.3 ETH and remain sought-after alongside other avatar collections like Doodles, Azuki, and Bored Ape Yacht Club. TC
Otherdeeds NFT Plots for Otherside
Yuga Labs didn’t set a foot wrong in 2021, and the Bored Ape Yacht Club creator appeared set on continuing its winning streak this year. A landmark acquisition of Larva Labs’ CryptoPunks and Meebits collections and the massive ApeCoin airdrop meant that Bored Ape fever was still running strong at the start of the year, but the hype peaked with the launch of Otherside, Yuga’s long-promised Metaverse world.
Otherside kicked off with a highly anticipated mint for plots of virtual land called Otherdeeds in April, and the sale became such a big talking point that it had regular crypto followers queuing up for a place alongside the usual NFT suspects. In the end, demand for the 55,000 digital land plots was so high that gas prices skyrocketed to thousands of dollars, leading Yuga to come out with a statement blaming the botched launch on Ethereum. Yuga raked in over $310 million worth of ApeCoin once the dust had settled, making the drop the most lucrative in NFT history.
Despite the shaky start, as with every big drop like this, there was a buzz surrounding the Otherdeeds NFTs in the days following the reveal. The 10,000 plots featuring “Kodas” and the much rarer “Mega Kodas,” unique alien-like characters that are set to play a starring role in Otherside, soared on the secondary market, though prices have since cooled as crypto winter prevails.
Barring a demo run, Yuga has stayed tight-lipped on how Otherside will look when it’s complete. While Otherdeeds have been trending down since the mint, the collection is one of the most traded on the market with a staggering 358,000 ETH worth of volume on OpenSea alone. Time will tell whether demand for Otherdeeds will return, but it will likely need Metaverse hype and a killer product to break new highs. Still, with Yuga at the helm and one of the NFT space’s most passionate communities, it has as good a chance as any at dominating once the market picks up. CW
Even in the depths of a bear market, NFT collections can come out of left field and surprise the market. No collection has proved this better than goblintown.wtf.
goblintown.wtf consists of 9,999 ugly goblin avatars launched as a free stealth mint on May 21. The collection initially stayed relatively under the radar, but interest soon started to grow due to the mystery surrounding the project. At the time, all onlookers could deduce was that the NFTs were a reference to “Goblintown”—a term crypto natives use to refer to bearish conditions in the digital assets space. Details such as the project’s creators, future plans, or what the NFT might be used for were completely absent.
Whenever there’s a mystery, it lets imaginations run wild, and in this respect, goblintown.wtf was no exception. Many crypto community members theorized the collection could have ties to Board Ape Yacht Club creator Yuga Labs due to a reference to goblins in a leaked pitch deck from the company. Others noticed the art style, as well as goblin voices from an enigmatic Twitter spaces call, were reminiscent of Mike Judge’s Beavis and Butthead, fueling speculation that he was at least partly responsible.
As the excitement and speculation grew, so did the prices of the goblin NFTs on the secondary market. At peak mania, goblins traded hands for as much as 10 ETH, almost $20,000 at the time. One rarer piece from the collection, dubbed “Crustybutt da gobblin king,” sold for 69.42 ETH and remains the highest value secondary sale for the collection to date. TC
QQL—Tyler Hobbs and Dandelion Wist
Tyler Hobbs is best known as the creator of Fidenza, the world’s most important generative art NFT collection to date. The U.S. artist has dropped a few works since his magnum opus exploded in popularity at the height of NFT mania in 2021, but QQL is the one that could have the biggest impact for years to come.
Created in collaboration with Archipelago co-founder and generative art collector Dandelion Wist, QQL is best described as a collaborative experiment that invites the collector to become the creator. Through the project’s website interface, fans can explore the QQL algorithm by toying with a range of settings to create their own outputs. Those holding a mint pass can add an output to the collection, either by picking out a favorite from their own archive or acquiring someone else’s QQL seed.
The collection’s collaborative nature means that co-creators can hold out to mint their best work, and the depth of the algorithm makes for surprising variety across each piece. At its core, QQL features distinctive ring shapes in a variety of colorful palettes akin to Fidenza, but the algorithm is much richer and more complex than the one that put Hobbs on the map.
999 QQL mint passes sold at 14 ETH in a Dutch auction in September, proving that the NFT market is still alive despite activity declining across the board. Only 150 of the passes have been redeemed at press time, hinting that collectors are planning to hold for the long haul. If generative art is to take off and Hobbs remains at its forefront in the future, QQL could be an important collection in its story—even if it could be decades until it’s complete. CW
Disclosure: At the time of writing, some authors of this feature held some Otherside NFTs, a QQL mint pass, ETH, and several other crypto assets.
2022 in Review: the Top 10 Crypto Moments of the Year
- The crypto ecosystem shed $2 trillion in market value and lost several major players in 2022, but it didn’t die.
- Terra, Three Arrows Capital, FTX, and a host of other big entities suffered wipeouts that characterized crypto’s turbulent year.
- Ethereum also completed “the Merge” to Proof-of-Stake after years of anticipation.
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From crypto war relief to multi-million dollar hacks and industry-shaking blowups, 2022 was another eventful year for the digital assets space.
The Crypto Moments of the Year
If you asked the average person on the street to sum up 2022 in crypto, there’s a good chance they’d tell you this was the year the technology died. Thousands of investors who came in drunk on bull market euphoria last year vowed to leave the space forever in 2022 as the hangover kicked in, but there were a few diehards who stuck around.
For those who did, this was hardly a quiet year. Sure, our coins tanked in dollar value this year as the industry suffered a $2 trillion rout, but there were plenty of major events to keep us entertained. Or if not entertained, at least occupied.
As is typical of bear markets, some of the landmark events of the year were also some of the most catastrophic. And few would argue that 2022 was one of crypto’s most catastrophic years yet. We watched in shock as Terra, Three Arrows Capital, and FTX fell like dominoes only a few months apart. People suffered staggering losses and it felt like the industry was set back by years.
Nonetheless, 2022 gave us a few positive developments. Ethereum had a good year despite ETH’s weak price performance as “the Merge” finally shipped. We also saw governments worldwide acknowledge crypto’s potential against a backdrop of war and soaring inflation.
2022 was one of crypto’s rockiest years ever, but the industry survived. During crypto’s last bear market, there was a question of whether the ecosystem would pull through. In 2022, those watching the space closest have no doubts that crypto is here to stay. And not just here to stay, but after the events of this year, the foundations should be stronger than ever in 2023 and beyond.
For now, though, the industry is still reflecting on what was—by all accounts—a memorable, if not entirely positive, year for the crypto ecosystem. Here were the 10 most important moments.
Canada Freezes Freedom Convoy Funds
The first major crypto event of 2022 did not occur on-chain, or even online, but in Ottawa, the capital city of Canada. On January 22, hundreds of Canadian truckers departed from various parts of the country to begin congregating at Parliament Hill to protest against COVID-19 vaccine mandates and restrictions. Since the government refused to negotiate with them, the so-called “Freedom Convoy” took control of the streets. Law enforcement struggled to remove the protestors due to the size of the convoy and vehicles.
On February 14, in response to the protests, Prime Minister Justin Trudeau invoked the Emergencies Act, which temporarily gives the government extraordinary powers to respond to public order emergencies. The Trudeau administration then ordered Canadian financial institutions to freeze the bank accounts of protesters—as well as anyone supporting them through donations—in a bid to cut their funding. Undeterred, the demonstrators switched to crypto, which led Canadian authorities to blacklist at least 34 different crypto wallets connected to the Freedom Convoy. Shortly thereafter, a joint police force forcefully removed the truckers from the streets; by February 20, Ottawa’s downtown area was completely cleared.
For the crypto space, the Ottawa protests showed the ease with which even Western democracies could weaponize their financial sectors against their own citizens. In that context, Bitcoin’s mission came to the fore. Crypto enthusiasts pointed out that Bitcoin offers a permissionless, censorship-resistant, worldwide payment system as an alternative to state-controlled banking networks. For all their faults, decentralized cryptocurrencies offer a crucial guarantee: your money really is your own, and no one can stop you from using it. As Arthur Hayes wrote in a March Medium post, if you’re solely relying on the traditional banking sector, “you might think you have a net worth of $100, but if the bank or government for whatever reason decides you can no longer access the digital network, your net worth becomes $0.” Tom Carreras
Ukraine Begins Accepting Crypto Donations
The Russia-Ukraine conflict had a major impact on global markets this year, crypto included. The market plunged as President Vladimir Putin ordered the Russian military to invade Ukraine, but the war became the first that saw crypto take center stage.
Within days of the invasion, the Ukrainian government’s official Twitter account put out a post requesting Bitcoin and Ethereum donations with two wallet addresses included. The tweet immediately sparked confusion, with Vitalik Buterin weighing in to warn people that the account may have been hacked.
But the government’s Ministry of Digital Transformation promptly confirmed that the request was, in fact, legitimate. The Ukrainian government really was asking for crypto to fund its war relief efforts.
Donations flooded in, and within three days the government had raised over $30 million worth of BTC, ETH, DOT, and other digital assets. Someone even sent a CryptoPunk NFT.
The initial fundraising campaign was just one of the government’s historic moves to embrace crypto during a time of crisis. There was also an NFT museum, while UkraineDAO worked with the government to raise additional funds and awareness.
Crypto also came under sharp focus during the war due to the West’s sanctions against Russia, with politicians warning that Russian oligarchs could turn to crypto to hide their wealth. Citizens who fled Russia turned to Bitcoin to preserve their money as the ruble shed its value, while major exchanges like Kraken, Binance, and Coinbase faced calls to block Russian citizens following global sanctions. The three exchanges limited their services following EU sanctions.
Amid the destruction from Russia’s attack on Ukraine, crypto’s role in the war showed the power of borderless money clearer than ever. In a time of crisis, Internet money served as a powerful tool for those in need. Ukraine’s request for crypto donations was a world first, but it’s safe to say we’ll see other nation states adopting crypto in the future. Chris Williams
Biden Signs Executive Order on Crypto Regulation
On top of every other haywire thing that happened this year, authorities the world over—but especially in the U.S.—stepped their regulatory game up to a whole new level. And frankly, it’s about time. If we’re being honest, the U.S. government’s approach to regulating cryptocurrency has been scattershot even on its best days, and you can hardly imagine an industry imploring, just shy of begging, for a clearer set of rules.
Going into 2022, it was pretty clear the executive branch had made no real coordinated progress on even sorting out what digital assets actually are, let alone how to regulate them. Are they securities? Commodities? Something else entirely? Maybe they’re like securities in some ways but not like securities in other ways. Maybe some of them are commodities, and others are securities, and others are currencies… but what are the criteria by which we make those distinctions? Is Congress working on this? Who even makes the rules in this branch of government anyway?
The President, that’s who.
13 years and three administrations after Bitcoin’s genesis block was mined, President Biden issued an executive order directing almost all federal agencies, including the cabinet departments, to finally come up with comprehensive plans for U.S. crypto regulation and enforcement. Biden’s order was anticipated for months before it was finally signed in March, and when it landed it was generally seen as a boon to the industry. Far from the draconian approach that many had feared, Biden’s order was little more than a research directive that required each agency to get a plan together once and for all and submit it to the White House.
While there is little disagreement that a comprehensive crypto rulebook is needed, the government body with the power to write one—i.e., Congress—isn’t signaling that it’s rushing any through. As it currently stands, crypto can only be regulated under the framework of the laws as they are currently written, and that is the president’s job. It’s about time a president at least got the ball rolling.
If we’re being totally fair, an executive order really isn’t much in terms of power and enforceability; it has about the same force of law as an office memorandum. But when the office in question is the Executive Branch of the United States, that memo’s importance can’t be overstated. Jacob Oliver
Attackers Steal $550M From Ronin Network
Crypto suffered a number of high-profile hacks in 2022, but the nine-figure exploit that hit Axie Infinity’s Ronin bridge in March was the biggest by some distance.
A group of attackers later identified by U.S. law enforcement as the North Korean state-sponsored Lazarus Group used phishing emails to gain access to five of nine Ronin chain validators. This allowed the criminal syndicate to loot the bridge that connected the network to Ethereum mainnet of 173,600 Ethereum and 25.5 million USDC with a combined value of around $551.8 million.
The strangest detail of the whole incident is that the hack occurred six days before the news broke. For almost a week, nobody managing the bridge or providing liquidity realized the funds had been drained. While this shows a worrying lack of attention from Axie Infinity creator Sky Mavis and its partners, the slow response can partly be explained by the bridge’s lack of use due to deteriorating market conditions.
The Ronin incident marked the start of a spate of Lazarus Group attacks against the crypto space. In June, Layer 1 network Harmony lost $100 million to a similar phishing scheme, while DeFiance Capital founder Arthur Cheong also fell prey to a targeted attack from the North Korean hackers, costing him a stack of high-value Azuki NFTs.
Although the majority of these funds are still missing, around $36 million has been returned with the help of blockchain analytics firm Chainalysis and crypto exchange Binance. Tim Craig
Yuga Labs Launches Otherside
Yuga Labs won at NFTs in 2021, but the Bored Ape Yacht Club creator didn’t slow down on its winning streak as it entered 2022. A March acquisition of Larva Labs’ CryptoPunks and Meebits collections sealed Yuga’s crown as the world’s top NFT company, helping Bored Apes soar. Bored Ape community members were treated to the biggest airdrop of the year when ApeCoin dropped the following week, with holders of the original tokenized monkey pictures receiving six-figure payouts. The company also landed a mega-raise led by a16z, but its biggest play of the year came in April as it turned its focus toward the Metaverse.
Yuga kicked off its Metaverse chapter with an NFT sale for virtual land plots, offering community members a shot at owning a piece of a mystical world dubbed “Otherside.” True to the Yuga playbook, existing community members were given their own Otherdeeds plots for free as a reward for their loyalty, while others were left to scrap it out for the virtual world’s 55,000 plots in a public mint.
And boy did they scrap.
The Otherside launch was the most anticipated NFT drop of the year and Bored Apes were soaring, so demand for the virtual land was high. As expected, a gas war ensued, and only those who could afford to spend thousands of dollars on their transaction made it through. Yuga blamed the launch on Ethereum’s congestion issues and hinted that it could move away from the network, though those plans never passed. All told, the company banked about $310 million from the sale, making it the biggest NFT drop in history. Prices briefly spiked on the secondary market and have since tumbled due to general market weakness, but it’s safe to say that all eyes will be back on the collection once Metaverse hype picks up. In a year that saw interest in NFTs crash, Yuga proved once again that the technology isn’t going anywhere. And Otherside has as good a shot as any to take it to the next level. Chris Williams
At its height, Terra was one of the world’s biggest cryptocurrencies by market capitalization. Terra saw a staggering rise in late 2021 through early 2022 thanks mainly to the success of its native stablecoin, UST. Contrary to most stablecoins, UST was not fully collateralized: it relied on an algorithmic mechanism to stay on par with the U.S. dollar. The system let users mint new UST tokens by burning an equivalent amount of Terra’s volatile LUNA coin, or redeem UST for new LUNA coins.
Terra’s mechanism helped the blockchain rise at the onset of the bear market as crypto users sought refuge in stablecoins to avoid exposure to plunging crypto assets. UST was a particularly alluring option because of Anchor Protocol, a lending platform on Terra that provided a 20% yield on UST lending. As market participants flocked to UST to take advantage of the yield, they increasingly burned LUNA, sending its price higher. The rise—coupled with Terra frontman Do Kwon’s emphatic endorsements on social media—projected a feeling that Terra was simply invulnerable to the downtrend. In turn, UST seemed even more attractive.
At its peak, the Terra ecosystem was worth more than $40 billion, but the network’s dual token mechanism proved to be its undoing. A series of whale-sized selloffs challenged UST’s peg on May 7, raising alarm bells before UST posted a brief recovery. UST lost its peg again two days later, triggering a full-blown bank run. UST holders rushed to redeem their tokens against LUNA coins, greatly expanding the supply of LUNA and depreciating the coin’s value, which in turn led even more UST holders to redeem. By May 12, UST was trading for $0.36, while LUNA’s price had crashed to fractions of a cent.
Terra’s collapse caused a market wipeout, but the damage did not stop there. The protocol’s implosion sparked an acute liquidity crisis, hitting major players like Celsius, Three Arrows Capital, Genesis Trading, and Alameda Research. Lawmakers from around the world also decried the risks posed by stablecoins, especially algorithmic ones. In many ways, Terra was decentralized finance’s biggest failure, and the consequences of its implosion are still unraveling. Tom Carreras
Celsius, 3AC Fall in Major Crypto Liquidity Crisis
When the Terra ecosystem collapsed, we knew the fallout would be bad, but we didn’t yet know who it would affect and how long it would take. As it happens, it took about a month. Terra imploded in May, erasing tens of billions of dollars in value and drawing the attention of prosecutors on multiple continents. By mid-June, the fruits of Do Kwon’s “labor” had found their way into centralized, retail crypto markets, and that’s when things really went south.
On the evening of June 12, Celsius alerted its customers that it was temporarily, but indefinitely, placing withdrawals on hold. Everyone instantly knew that this was very bad. Celsius had invested in Terra, and when the bottom fell out of that project, it fanned a flame that had already been lit by CEO Alex Mashinsky’s unauthorized trading on the company’s books, as was later revealed. As its investments became insolvent, it sparked a chain reaction among a familiar cast of characters, all of whom saw better days before June 2022.
What’s worse, most of this borrowing and lending took place within a closed network of a handful of companies. Celsius loaned money on decentralized platforms like Maker, Compound, and Aave but also loaned heavily to centralized entities like Genesis, Galaxy Digital, and Three Arrows Capital. Those guys (except Galaxy, to its credit) were turning around and loaning it back out again, and so on. It will likely be years before we see the full chains of custody surrounding all of the assets that were passed around, but signs suggest that for all their multi-billion dollar valuations, these firms might have just been passing the same pile of money around over and over again.
The next major implosion was Three Arrows; within a few days of Celsius’s announcement, rumors of 3AC’s insolvency began to circulate and its co-founders, Su Zhu and Kyle Davies, went silent. They’re now believed to be on the run owing about $3.5 billion after defaulting on a series of loans. Others like Babel Finance, Voyager Digital, and BlockFi were also hit by the contagion that would eventually reach the Sam Bankman-Fried’s FTX empire (even if it took a few months).
The June liquidity crisis served as a dreadful reminder of the dangers of centralized exchanges and the degree to which these so-called “custodians” actually custody customer funds. Granted, some of these companies did not hide what they were doing, even if they weren’t drawing particular attention to it, either. But hey, that was the central value proposition of CeDeFi—if you wanted attractive DeFi yields but didn’t have the time, knowledge, or patience to do it yourself, you might have a custodian do it for you. But you have to be able to trust them to some degree, and even if you are giving them permission to play with your money, they need to be upfront about what—and I mean exactly what—they’re doing with it.
It also tests the boundaries of “terms and conditions,” which have always been a thorn in the side of any user trying to interact with any given product. Celsius, to its credit, made it pretty plain that it was going to do whatever it wanted with customer deposits: its terms of service clearly state that it is not a legal custodian of customer funds and instead considers customer deposits a “loan” to the company, which it is then free to trade, stake, lend, transfer, and more with the money, all while clarifying that “in the event that Celsius becomes bankrupt… you may not be able to recover or regain ownership of such Digital Assets, and other than your rights as a creditor of Celsius under any applicable laws, you may not have any legal remedies or rights in connection with Celsius’ obligations to you.”
That’s some pretty weaselly language for a brand that promoted itself as a more “trustworthy” alternative to banks, but it would seem they’re going to ride it all the way to the bankruptcy courts. Jacob Oliver
U.S. Treasury Sanctions Tornado Cash
Tornado Cash is a privacy-preserving protocol that helps users obfuscate their on-chain transaction history. On August 8, the U.S. Treasury’s Office of Foreign Assets Control announced it had placed the protocol on its sanctions list. In a statement, the agency claimed that cyber criminals (including North Korean state-sponsored hackers) used Tornado Cash as a vehicle for money laundering.
The ban outraged the crypto industry. Crypto companies like Circle and Infura immediately moved to comply with the sanctions by blacklisting Ethereum addresses that had interacted with Tornado Cash. Some DeFi protocols followed suit by blocking wallets from their frontends.
Following OFAC’s announcement, Netherlands’ Fiscal Information and Investigation Service arrested Tornado Cash core developer Alexey Pertsev on suspicion of facilitating money laundering. He’s still in custody with no formal charges leveled against him at press time.
The Tornado Cash ban was unprecedented as it marked the first time a government agency sanctioned open-source code rather than a specific entity. It also flagged concern about Ethereum’s ability to remain censorship resistant.
Commendably, the crypto community has taken various initiatives to fight back against the decision, the most notable of which is Coin Center’s lawsuit against OFAC. The outcome of the case could have a huge impact on crypto’s future as it will determine whether the U.S. government has the power to sanction other decentralized projects. Tom Carreras
Ethereum Ships “the Merge”
There was little to distract us from bad news in 2022, but Ethereum brought some relief to the space over the summer as it started to look like “the Merge” could finally ship. Ethereum’s long-awaited Proof-of-Stake upgrade has been in discussion for as long as the blockchain’s existed, so anticipation was high once the September launch was finalized.
Hype for the Merge was enough to lift the market out of despair following the June liquidity crisis, and talk of a Proof-of-Work fork of the network helped the narrative gain steam. ETH soared over 100% from its June bottom, raising hopes that the benefits of the Merge—99.95% improved energy efficiency and a 90% slash in ETH emissions—could help crypto flip bullish.
In the end, the upgrade shipped without a hitch on September 15. As some savvy traders predicted, the Merge was a “sell the news” event and EthereumPOW failed, but the Ethereum community was unfazed by weak price action. Frequently compared to an airplane changing engine mid-flight, the Merge was hailed as crypto’s biggest technological update since Bitcoin’s launch, and Ethereum developers were widely applauded for its success.
Interestingly, the mainstream press picked up on Ethereum’s improved carbon efficiency once the Merge shipped, but it’s likely that the real impact of the update will only become apparent over the coming years.
The Merge has vastly improved Ethereum’s monetary policy to the point where ETH has briefly turned deflationary, and it may have set the stage for yield-hungry institutions to adopt ETH. So if crypto is to enter a new bull market in a post-Merge world, Ethereum has as good a shot as any at leading the race. Chris Williams
By the autumn of 2022, the feeling of disaster in the crypto world had become almost normalized. Terra had imploded, a dozen or so prominent companies folded over the summer, the Treasury outlawed an open-source protocol, and so on. But while we were almost numb from the sheer scale of catastrophes the year hit us with, 2022 saved its most shocking cataclysm for last.
Just a month ago, FTX was on top of the world. The Bahamas-based exchange was known for spending a lot of money on promoting its image, and in doing so made itself as close to a household name as there is in crypto. Clearly targeting the American retail consumer, FTX went especially big on associating itself with sports, striking sponsorship deals with the likes of Tom Brady and Steph Curry, slapping its name on Miami Heat’s arena, and splashing out on advertising at the Super Bowl. When other centralized custodians began to fail, FTX stepped to offer emergency credit and investments to stave off the worst.
Its scruffy CEO, Sam Bankman-Fried, would make the special effort to trade in his cargo shorts for a shirt and tie when he visited D.C. to hold court with politicians and regulators, assuring them of FTX’s trustworthiness and commitment to level-headed cooperation between government and industry to institute reasonable rules and regulation for the space. He graced magazine covers, hosted former heads of state at FTX events, and made grand shows of his charitable inclinations, insisting his ultimate goal was to make as much money as he could so that he could give it all away to good causes.
So it came as a bombshell in early November when rumors of illiquidity at FTX’s officially-unofficial sister company, Alameda Research (also founded by SBF and, according to court filings, entirely under his control) could put a squeeze on FTX. That sparked a bank run on the platform, which subsequently revealed that most of the exchange’s assets were already gone. By most accounts, the story is that FTX “lent” those deposits to Alameda, which had lost billions on poorly-managed, high-risk positions. Then Alameda lost those too, leaving a $10 billion hole in FTX’s books.
As more details come to light through witness interviews and court documents, it’s become painfully clear that not only was FTX not a good company, it was an exceptionally bad one. Everything—and I mean everything—about the FTX blowout was extraordinary, with each revelation of malfeasance, deception, duplicity, incompetence, and fraud outmatched only by the next one. Obviously details are still murky and no one has yet been proven guilty of any crimes. But we know at least two things for sure: there is substantial evidence that FTX took $10 billion from its customer deposits to cover Alameda’s bad trades, and they were hardly even bothering to keep track of the money.
It’s one thing to cook the books; it’s another thing entirely not to keep the books at all. Even granting the most generous benefit of the doubt still suggests utter incompetence at best. It now seems likely that when FTX paused withdrawals during the bank run it experienced on November 8, it may very well have been in part because the firm didn’t even know where the money was.
Three days later, FTX filed for bankruptcy and SBF “resigned” from his position as CEO of FTX. He was immediately replaced by John J. Ray III, a man who has made a career out of overseeing the dissolution of failing companies, some of which tanked as a result of fraud or other malfeasance. In language that is nothing short of legendary, Ray testified in writing to the court:
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here. From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented.”
And this is the man who oversaw the dissolution of fucking Enron.
SBF’s defense, if one could really call it that, has been an ill-advised series of public comments, interviews, and tweets that have accomplished nothing except to enrage everyone watching and add to the prosecutors’ list of evidence. He’s still in the Bahamas, reportedly “under supervision” but living life in his multi-million dollar Nassau penthouse; most onlookers, though, are wondering why he’s not currently “under supervision” at a federal holding facility without bail. Bernie Madoff was arrested within 24 hours of the authorities learning of the evidence of his improprieties; it leaves us wondering what’s taking them so long this time. Jacob Oliver
Disclosure: At the time of writing, some authors of this piece owned BTC, ETH, some Otherside NFTs, and several other crypto assets. An author had also filed a claim in Bragar, Eagle, & Squire’s class-action suit against Celsius Network.
The latest proposal from MakerDAO could have this impact on DAI
- MakerDAO voted to implement the DSR that would see DAI holders get 1% of their investments
- DAI, currently the fourth largest stablecoin, witnessed a decline in volume over the last 24 hours
MakerDAO, the governance division of Maker, the company that issues DAI, recently voted on the addition of interest rates in a proposal on 28 November. The proposed interest rate was between 0.01% and 1%.
Most voters chose a DAI Savings Rate (DSR) of 1% after voting. This meant that once the DSR feature launched, investors would have 1% added to their investment each time they used it.
DAI holders and investors, in particular, would benefit more from owning the stablecoin.
MakerDAO votes for a 1% interest rate
With this vote, investors could earn a 1% annualized return on their DAI holdings, as incentivized by the DAI Savings Rate (DSR). Implementation plans would get underway after the voting phase to facilitate eventual deployment.
The community would still require future executive votes to confirm the decision. Holders of the MKR token will also vote for the activation of the DSR in the protocol.
DAI active addresses increase
In terms of market capitalization, DAI was the fourth-largest stablecoin at the time of this writing. It was also the 12th-largest cryptocurrency overall, according to data from CoinMarketCap.
Over the previous 24 hours, the stablecoin’s total volume had decreased by over 10%. Its popularity and user base might expand due to the recent DSR. The number of addresses had increased, according to the active address measure for the previous 30 days. The growth, as per the chart, might reach the level last seen in July.
The Maker community approved a $500 million investment in bonds and treasuries in a vote on 6 October. This action was just one of many that the community took to diversify its resources and lower risk exposure. Additionally, a motion to give Coin Base Prime custody of more than $1 billion in USDC for a 1.5% profit was made to benefit the community.
These developments indicate that the current DSR feature can be maintained, and the incentives suggest that the ecosystem would have plenty of liquidity.
Bitcoin At $500K No Longer Possible, Galaxy Digital CEO Says, As He Backtracks
Bitcoin seems to have reached a point when even its biggest and most bullish admirers and investors are slowly losing hope in the crypto asset altogether.
In fact, no less than well-known crypto advocate and Galaxy Digital CEO Mike Novogratz, who, back in March 2022, said the maiden cryptocurrency will hit $500,000 by 2027, dialed down his predictions owing to the subpar performance of BTC.
During his recent interview, Novogratz seemingly blamed the interest rate hikes that were implemented by the U.S. Federal Reserve in a desperate but aggressive attempt to contain the rate of inflation in the country.
The CEO also mentioned the collapse of the FTX exchange platform, lenders Celsius Network and BlockFi and Three Arrows Capital hedge fund as major contributory factors to the downhill trajectory of the broader market as it hurt people’s confidence on the digital asset class.
A Tall Order For Bitcoin
Many analysts and experts were skeptical about the Galaxy Digital top honcho’s forecast for Bitcoin as it meant the asset will have to grow in meteoric proportions for it to reach the $500K level.
During the time Novogratz made his statement, BTC needed to increase its value by a dozen times in order to trade at half a billion dollars.
In doing so, the cryptocurrency will then push its market capitalization to $9.2 trillion – 10 times the current overall valuation of the entire crypto market.
Galaxy Digital CEO Mike Novogratz. Image: Forbes.
The closest Bitcoin has even been was when it registered its prevailing all-time high of a little over $69,000 back in November 2021.
During that time, its market cap surpassed the $1 trillion marker. Still, BTC is still several steps away from the level Novogratz was so sure it would be five years from now.
With all things considered, the crypto advocate maintained Bitcoin will still hit $500,000 but no longer within five years.
A Quick Look At Bitcoin’s Current Performance
According to tracking from Coingecko, at the time of this writing, BTC is changing hands at $17,017, having lost more than 70% of its value in the same time last year.
It still remains as the largest cryptocurrency by market capitalization but its overall valuation is currently at $327.04 billion.
It will most likely end 2023 with a value that is significantly lower than what it started this year with. Some analysts say Bitcoin’s surge will come between next year and 2024, although the uptick will probably peak at $24K.
Crypto total market cap at $810 billion on the daily chart | Featured image from Common Cents Mom, Chart: TradingView.com
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